US stocks have tumbled, dragging the S&P 500 into a bear market, as worries about more credit losses hurt financial companies.
The S&P closed 20% below its all-time high set in October, making it the last of the three major American stock indexes to fall into a bear market.
All three major stock indexes fell more than 2% on Wednesday.
The Dow Jones industrial average shed 236.77 points, or 2.08%, to 11,147.44, while the Standard & Poor's 500 Index tumbled 29.01 points, or 2.28%, to 1,244.69.
The Nasdaq Composite Index fell 59.55 points, or 2.60%, to close at 2,234.89.
Shares in two large mortgage lenders, Fannie Mae and Freddie Mac, dropped sharply as some investors worried that they would need to raise billions of dollars in additional capital through stock sales, diluting the holdings of current investors.
Merrill Lynch shares fell more than 9%, when Fitch Ratings said it may cut the investment bank's debt rating, given expected ongoing write-downs and diminished prospects for earnings.
Cisco Systems led technology shares lower after its CEO raised fears of an extended economic downturn. On the Nasdaq, Cisco shares fell 5.7% percent to $US21.58.
Earlier, markets in the Asia-Pacific region were up at the close of trade on Wednesday.
The New Zealand sharemarket was up 16 points to 3177.
Fletcher Building was up 20c to $6.73, while Telecom rose 5c to $3.52. Pumpkin Patch was up 3c to $1.51. Sky Television was unchanged at $4.20.
The Australian share market lifted as investors snapped up stocks that now look cheap after being beaten down on the back of higher oil prices, the global credit crunch and fears of an economic slowdown.
The benchmark S&P/ASX200 index gained 79 points, or 1.6%, to 5011.9, while the broader All Ordinaries added 67 points, or 1.33%, to 5089.4.
The September share price index futures contract was up 33 points to 4994 on a total volume of 27,748 contracts.
The price of gold in Sydney was $US922.15 per fine ounce, down $US6.15 on Tuesday's close of $US928.30.
National turnover was 1.58 billion shares worth $A6.17 billion, with 538 stocks up, 615 stocks down and 324 unchanged.
In Japan, shares closed 0.15% higher. The Tokyo Stock Exchange's benchmark Nikkei-225 index firmed 19.03 points to end at 13,052.13.
The broader Topix index of all first-section shares gained 2.02 points or 0.16% to 1,285.53.
Hong Kong share prices were up 2.8% at the close. The benchmark Hang Seng Index finished 585 points up, at 21,805.81.